Punjab and Maharashtra Bank is a multi-state scheduled co-operative bank which was founded in 1984 with its headquarter based in Mumbai. It’s area of operations are taking place in different regions of Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh. PMC is one of the top 10 co-operative banks of India. Its total deposits calculated of about 11,617.34 crore.
The bank’s reputation and dignity falls in danger after RBI ordered PMC bank not to engage in any business for six months and put a lid on depositor withdrawals. The bank provided the loan which has a total amount of 4,355 crore to Housing Development and Infrastructure Ltd (HDIL) and its group entities, it results in 70% transfer of the total credit of the PMC bank to HDIL and its associations.
It is investigated that 21,049 bank accounts were opened with a false identity to disguise 44 loan accounts. The bank system also breached to provide loans to these accounts. This case of fraud is caught by some women employees from the credit department of PMC bank. When all this came out, customers rushed to the bank to withdraw their money which is earned by their blood and sweat but withdrawal limit set by the bank horribly disappointed their expectations.
RBI stated that depositors are not allowed to withdraw more than Rs.1000 from the total balance for every savings and current accounts. Later, RBI increased the limit to Rs.10,000.
This created a chaos among the account holders who are mainly self-employed, traders and wage earners. RBI appointed administrator, JB Bhoria told the consumers,” I would like to tell the people that there is no need to get panic as we have DICGC (Deposit Insurance and Credit Guarantee Corporation) cover through which deposits of up to Rs.1 lakh can be recovered.” He said further,” Besides, we have our own assets which are liquid. We are trying our best to sort out the situation.” Apart from this, as per RBI directives PMC Bank IFSC code used for international and local transactions are disabled .
Six people have lost their lives due to their loss of money. Reports states that two customers have died so far in Mumbai because of the heart attack. Dr. Nivedita Bijlani (39) with deposits of over Rs.1 crore suicides by overdosing himself of sleeping pills. Gulati, an ex-employee of the collapsed airline Jet Airways had kept his savings of Rs.90 lakh in the bank. His specially abled son needs treatment on the regular basis, but because of the phenomenon it creates a terrible situation for him.
HDIL chief Rakesh Wadhawan and his son Sarang Wadhawan are under custody with Mumbai Police. Assets of Rs.3,500 crore of the HDIL group has been sealed by the Enforcement Directorate (ED).
By observing this when Indian banking system is already passing through a tough time, it is a need of the hour for government to interfere in the circumstances. With the last year’s Punjab National Bank fraud, the banking sector has a huge Non Performing Assets (NPA) right now. And another bank fraud came out of the shadow is making the situation even worse. Government needs to stop political intervention in the operation stages of Indian banks. Whereas, banks need to update their functional and operational system to prevent this kind of crisis.
Increase in cases of banking frauds are affecting customers trust in commercial banking services. If this will continue it is also a possibility that people will stop depositing large amount of money in the banks. And this will results in improper functioning of financial system of the country.